In its second quarter, Apple (AAPL -1.92%) proved its recent return to growth won't be short-lived. Better-than-expected results, as well as growth in every one of the tech giant's product segments, highlighted a strong business with loyal customers.
Headed into the upcoming launch of its 10th-anniversary iPhone, Apple's business is well-positioned for sustained growth. Not only were Apple's fiscal third-quarter results exceptional, but Apple's guidance for its fourth quarter marked strong confidence from management about the company's future.
Image source: Apple.
Apple earnings: The raw numbers
|
Metric |
Q3 2017 |
Q3 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$45.4 billion |
$42.4 billion |
7% |
|
Earnings per share |
$1.67 |
$1.42 |
17.6% |
|
Gross profit margin |
38.5% |
38% |
50 basis points |
Data source: Apple's third-quarter financial results. Table source: author.
Apple's overall financial results were solid. Its revenue during the quarter jumped 7%, putting the company's streak of declining revenue last year further in the past. After returning to revenue growth in the first quarter of 2017, Apple's strong third-quarter revenue growth meant the tech giant's top-line growth has accelerated for three quarters in row. Apple's earnings per share also rose during the quarter, was up 17.6% year over year.
Apple's year-over-year expansion of its gross profit margin, from 38% in the year-ago quarter to 38.5% in Q3, was another good sign for investors. The metric is important for Apple, as it highlights the company's ability to charge premium prices and to leverage its economies of scale.
Both Apple's revenue and gross profit margin were at the high end of management's guidance range for the quarter.
Segment results
Every one of Apple's product segment's featured revenue growth. iPhone, which accounted for 55% of the quarter's total revenue, saw its revenue increase 3% year over year. Meanwhile, Apple's fastest-growing segment was its smallest; its other products segment, which includes sales of Apple TV, Apple Watch, Beats products, iPod, and accessories, boasted a 23% year-over-year jump in revenue. Services revenue, which is Apple's second-largest product segment, also demonstrated strong growth, rising 22% year over year.
On the back of a string of new updates to their product lines, Apple's Mac and iPad contributed meaningfully to the company's top-line growth. Mac and iPad revenue were up 7% and 2% year over year, respectively. For iPad, the quarter put the spotlight on a reenergized product line. After three quarters straight of year-over-year declines in segment revenue growth, the iPad's 2% year-over-year revenue increase validated Apple's moves to update the product line in March and June of this year. iPad revenue was down 12% year over year in Apple's previously reported quarter.
Guidance
Apple's outlook for its fourth fiscal quarter of 2017 also showed evidence of the company's revitalized growth story. Apple guided for fourth-quarter revenue between $49 and $52 billion, representing year-over-year growth of 4.5% to 10.9%. The midpoint of this revenue guidance would represent a 7.7% rise in revenue -- a rate that would mark Apple's fourth quarter in a row of accelerating revenue growth.
Apple's guidance for its fourth-quarter gross profit margin was a range of 37.5% to 38%. This compares to a gross margin of 38% in the fourth quarter of 2017.
In its earnings call on Tuesday, Apple management didn't shy away from referring to upcoming product launches, which likely include the tech giant's annual updates to its iPhone during the quarter. "And we're looking very much forward to the product rollouts [during the fourth quarter]," Apple CEO Tim Cook said.
